1. Workshop on irregularities EEA and Norway Grants 2009-2014 Financial aspects related to the irregularities Herdis Bjornevik Svendsen Financial Controller EEA and Norway Grants Tallinn, 04.12.15

2. Agenda Irregularities in EEA and Norway Grants Grant awarding, reallocation of funds and financial corrections Reporting on irregularities and recovered funds from projects in the IFRs Reporting on recovered funds from projects in the final balance Financial corrections, procedures and reimbursements

3. How to deal with irregularities in EEA and Norway Grants Zero-tolerance towards corruption and mismanagement of funds Errors vs Fraud Designated Entity – Irregularities reporting – Estonia Anti-Fraud Co-Ordination Service – Latvia Ministry of Finance – Lithuania Certifying Authority – Romania Ministry of Public Finances Reporting on irregularities in the IFRs and Payment of the Final Balance

4. Article 6.9 of the Regulation Grant awarding and reallocation of funds “1. Project grants that have upon project closure not been fully utilised, as well as project grants that have been cancelled due to irregularities or for other reasons, may subject to paragraph 2 of Article 12.2, be reallocated to future calls for proposals within the same programme or to additional activities of already approved projects, provided that these additional activities contribute to the objectives of the projects receiving the additional funds. 2. Any decision to reallocate project grants to already approved projects shall be based on recommendations by the Selection Committee. (…)”

5. Article 12.2.2 of the Regulation Financial corrections “Financial contributions cancelled [due to irregularities] may be reused under the programme for projects other than those that were the subject of the correction. When a financial correction is made for systemic irregularities or irregularities related to management or control systems within a programme, the financial contribution may not be reused for that programme.” The financial correction amount is reimbursed or de-committed from the project grant (i.e. the cancelled contribution may not be reused under the same project) The financial contribution cancelled may be reused for other projects under the same programme Deadline for reallocation to other programme: 31 October 2014 – no longer an option!

6. Article 11.7 of the Regulation Reporting on irregularities upon request (in projects) “1. Unless requested by the FMC/NMFA, the following cases of irregularities in projects need not be reported: (a) cases where the irregularity consists solely in the failure to implement a project, in whole or in part, owing to the bankruptcy of the Project Promoter; (b)cases brought to the attention of the Programme Operator, National Focal Point or Certifying Authority by the Project Promoter voluntarily and before detection by any of them, whether before or after the payment of the project grant related to that irregularity; (c) cases which are detected and corrected by the Programme Operator, National Focal Point or Certifying Authority before inclusion of the expenditure concerned in the statement of actual expenditure incurred in an interim financial report or in the final programme report.

7. Recovered funds from Projects Use of recovered funds shall be clearly stated in Part 1 of the IFR under Incurred Expenditure Negative amounts are not allowed when reporting on Incurred Expenditure in IFRs Clarifications shall be provided in the description box Recovered amount which has previously been reported as incurred shall be deducted from currently reported amounts Amounts should be in Euro

8. Recovered funds from Projects

9. Reporting on recovered funds from projects in IFRs (Part 1 of the IFR under Incurred Expenditure) The amount of [XXX] Euro recovered due to irregularities in project [X], reported on as incurred expenditure in the IFR#[number] has been reallocated and reused for project [Y] and paid out within this reporting period.

10. Article 8.4 of the Regulation Payment of the final balance “1. The final balance is: (a) the total reported eligible expenditure of the programme, taking into account any previous reimbursements, (b) less the following amounts: (i) the total advance and interim payments to the programme from the FMC; (ii) any co-financing from sources other than the EEA Financial Mechanism 2009-2014; (iii) total interest earned until the date of the final programme report but not reimbursed to the FMC; and (iv) any funds reimbursed from Project Promoters to the Programme Operator, not paid to other projects or reimbursed to the FMC”.

11. Recovered funds from Projects Reporting on recovered funds from projects in the final balance The amount of [XXX] Euro was recovered due to irregularities in project [X], reported as incurred expenditure in the IFR#[number], has not been reallocated and reused for another project during programme implementation.

12. Financial corrections by the Donors Article 12.2.1 of the Regulation “(..) in addition to financial corrections made by the Beneficiary State or the Programme Operator, the FMC / NMFA may make financial corrections based on the criteria in Article 12.3 consisting of cancelling all or part of the financial contribution of the EEA / Norwegian Financial Mechanism 2009-2014 to the programme or the Beneficiary State in question (..)” Can lead to a suspension of payments (Art.12.1) if donors becomes aware of suspected or actual cases of irregularities, or such cases has not been adequately reported, investigated or remedied

13. Financial corrections by the Donors Article 12.3.1. d and e of the Regulation “(..) The FMC / NMFA may make financial corrections if (..) (d) expenditure reported in a certified interim financial report or in a final programme report is irregular and has not been corrected by the National Focal Point or the Programme Operator prior to the sending of the notification according to paragraph 1 of Article 12.4; or (e) the National Focal Point and/or the Programme Operator have not complied with its obligations to investigate and/or remedy irregularities (..)”

14. Article 12.4 of the Regulation Procedures for financial corrections Donors shall notify the National Focal Point and the Programme Operator of its intention to make a decision on making a financial correction (including reason for the decision and indicate the relevant amount) The National Focal Point and the Programme Operator can within two (four) months from the sending of the notification provide any documents relevant to the decision The National Focal Point and the Programme Operator shall be notified of a decision no later than seven working days from the date the decision Debit note will be issued by the FMO

15. Article 12.5 of the Regulation Reimbursement The Beneficiary State shall reimburse the amount requested by the donors within three months of the date of the decision Possibility that the donors might waive any claim for reimbursement from the Beneficiary State if the National Focal Point and the Programme Operator have taken all reasonable measures to seek recovery of such funds Delays in reimbursement shall give rise to interest on an account of late payment, starting on the due date and ending on the date of actual payment Funds will be de-committed from the Programme

16. How to report on incurred costs in IFRs if detected irregularities are not closed? Investigating detected irregularities might be a lengthy process Article 8.3.5 of the Regulation – “(…) If an interim financial report has not been received within eight months from the end of the reporting period in which expenditure has been incurred by the Programme Operator, previously proposed expenditure for that period shall be declared ineligible and cancelled (…)” IFR reporting deadlines should be kept, regardless whether a detected irregularities is in review

17. How to report on incurred costs in IFRs if detected irregularities are not closed? Example: The Certifying Authority suspect that the calculation of salaries for the PO under the budget heading management costs is not proportionate. The exact amount linked to the irregularity (if it will be deemed as an irregularity) will not be confirmed before the IFR reporting deadline is passed. Programme Operator should: Submit the IFR in time, but Clarify the situation in the description box in Part 1 of the IFR under Incurred Expenditure

18. Reporting periods 1) Deadline for submission 15/07 (to be paid by the FMO on 15/08) Incurred: 01/01 – 30/04 Planned: 01/09 – 31/12 2) Deadline for submission 15/11 (to be paid by the FMO on 15/12) Incurred: 01/05 – 31/08 Planned: 01/01 – 30/04 3) Deadline for submission 15/03 (to be paid by the FMO on 15/04) Incurred: 01/09 – 31/12 Planned: 01/05 – 31/08

19. How to report on incurred costs in IFRs if detected irregularities are not closed? Salaries for Jan-Apr 2014: If no irregularity has been detected:Report in IFR#2 (submit by 15 Jul 2014); If irregularity has been detected:Report the eligible costs as actually incurred once the irregularity has been closed; Reporting of irregularity:Follow Chapter 11 of the Regulation. Salaries for May-Aug 2014 If no irregularity has been detected:Report in IFR#3 (submit by 15 Nov 2014); If irregularity has been detected: Report the eligible costs as actually incurred once the irregularity has been closed; Reporting of irregularity:Follow Chapter 11 of the Regulation. The amount in question should not be included as an incurred costs before the irregularity case is closed

20. Thank you for your attention!

21. Reporting periods (2)